Online accounting providers' FreeAgent share some tips on how to prepare for the new tax year.
When you’re running your own business, the start of the new tax year can be a great time for a spring clean and to get your books in order. Emily Coltman FCA, Chief Accountant to online accounting providers' FreeAgent gives her top tips on how to get your business ready for the new tax year.
The tax year in Britain runs from 6th April one year to 5th April the following year - that means the new tax year will start on 6th April 2015. Tax years are normally referred to by the two years that they span over - so the previous tax year that began on 6th April 2014 is called “2014/15” because it starts in 2014 and ends in 2015, and the new tax year will be “2015/16”.
If you’re a sole trader, then you’ll prepare accounts for your business every year to a date of your choosing. The easiest and most popular date to use for this is 5th April, to match the tax year end. Sole traders will also need to file a tax return every year for the previous tax year.
If your business is a limited company, you’ll be including on your tax return each year your salary and any dividends that the company paid you in that tax year. You may also have chosen your company's accounting year to match the financial year, which ends on 31st March. To make your next tax return a little less troublesome, read our tips for a stress-free Self Assessment.
A new tax year (or the start of a new accounting year) is a great time to make sure your books are in order.
If you have yet to issue any invoices to customers, now is a great time to catch up. Unless you’re using the cash-based method for simplified accounting, you have to include your income in your accounts when you earn it, not when you invoice for it or are paid for it, so there’s no disadvantage from a tax point of view to issuing your invoices before the end of the tax year.
Make sure you’ve tracked down all those fiddly little receipts and included in your accounts as many of your out-of-pocket expenses as you can claim tax relief on. Don’t forget expenses for which you haven’t paid actual physical cash, such as mileage travelled in your own car, or business use of home. It’s worth tracking down even the smaller expenses - we found that most small businesses expenses are under £10, but many small business owners aren’t claiming them for tax relief.
Now is a great time to check if what your books say is in your bank is the same as the balance on your bank statement. If not, then you should find the missing, wrong, or duplicate transactions and put it right. This is important because if you don’t have an accurate picture of what’s going in and out of your bank, you may find yourself running out of cash if you spend money you don’t have, or if you get a visit from a HMRC inspector then they may fine you for inadequate record-keeping!
If you’re preparing your business’s accounts to 5th April (or 31st March), and you’re planning to buy a piece of equipment for your business soon, such as a new computer, then buying it before the end of your accounting year rather than after means you’ll get the capital allowances on that asset a whole year earlier.
Also, don’t forget your personal tax. Have you used as much as you can of this year’s ISA allowance? What about pension investments or donations to charity? Remember to keep a note of all these points that could save you tax!
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22 June 2020 • 9-minute read
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